As home prices come crashing down, those who were planning to buy property find themselves torn between the temptation to go bargain hunting and watching from the sidelines to see how prices trend before jumping into a deal.
Home prices in Hong Kong have fallen 20 per cent to 30 per cent in the past two months, with anxious sellers presenting opportunities not seen in years. Many are convinced that prices have fallen enough and are snapping up new offers on the market.
Within days of their launch in the last week of November, some 400 flats were sold at mass housing project La Grove in Yuen Long, and 200 homes at the luxury residential project Peak One in Sha Tin.
But the reluctance to venture into the troubled real estate market seems equally strong. November home sales in Hong Kong dropped last month to the lowest level in 17 years. Only 3,786 properties were sold for a total of HK$10.65 billion, according to the Land Registry. This was even worse than the property market’s last big downturn during the severe acute respiratory syndrome outbreak of 2003.
Home purchases fell 37.5 per cent from 6,185 deals in October, and were 79.1 per cent less than the 18,319 deals in November last year.
The value of deals dropped 43.8 per cent from HK$19.85 billion in October, down a whopping 86.9 per cent from the HK$83.27 billion recorded in November last year.
With a shrinking economy and rising unemployment weighing down the market, many are asking themselves if they should wait a little longer to buy a house in order to get a better deal. Sunday Money asked some experts in the industry the same question: if this is not the right time to buy, when will it be, we asked. And is renting a better idea than buying in the current climate?
Leland Sun, founder and managing director of Pan Asian Mortgage
Buyers should hold off until next year, as property prices lag stock prices by six to 12 months. This is because Hong Kong is just beginning to readjust its property prices relative to the mainland (especially Shenzhen) and the rest of the world.
Also, given the Hong Kong dollar’s peg and weakening currencies, property prices will fall even faster and with greater volatility. Property prices here will fall back to a level where it will be an attractive buy in not just one but several lifetimes.
So rent is the way to go for now. In a nutshell, property will be an even better buy than stocks going forward, but it is still too early to step in.
Buyers should wait until the second half of 2009, or even 2010. The housing price trend is down and rents, especially for middle and high-end properties, may fall even faster given the expected loss of many expat positions in the financial services industry. Make good use of this opportunity.
Alva To, North Asia head of the consultancy department at DTZ
Don’t buy. If you own a home, you may even consider selling it now and renting a unit. Taking into account the poor state of the economy, prices will fall another 20 to 30 per cent.
Some buyers have started entering the market, so home prices will see some support temporarily.
These people have entered the market as they have not been affected by the declining economy.
But the worst is yet to come. The full impact will be reflected after the first quarter of 2009. By then, sentiment will turn sour and home prices will fall again.
Having said that, if you have targeted a particular flat for a long time, if you are totally secure in your job and are financially sound, go for that dream home.
In a bull market, you will never get a chance to buy a nice flat at a low price. Prices will drop 40 to 50 per cent from the peak in the first quarter of this year before it stabilises in the fourth quarter of next year.
But the situation could be worse, subject to how the economic crisis unfolds. Rents will also fall, but at a slower pace than prices. This is because as demand for home buying declines, people will shift to rented homes.
Nicholas Brooke, chairman, Professional Property Services Group
Given the likelihood of further downward adjustment, home seekers would be prudent to rent and ride out the financial storm.
However, if they find something that they particularly like and are prepared to see the value fall in the short term but recover in the long run, they might consider buying it.
It all depends on their investment horizon.
Ideally, the right time to buy should be at or close to the end of the current correction, which in my view is at least 12 months away.
We are likely to see a total correction in the mass market of between 30 and 40 per cent.
A correction of at least 15 per cent has already taken place.
Simon Lo Wing-fai, director of Colliers’ research and advisory wing
Renting is the better option in the near term unless one has a flexible amount of equity and can secure an attractive discount on the current market price.
The right time to buy should be when banks are more willing to offer financing again and rents start stabilising. I expect rents to fall 20 per cent and the capital value of homes to fall 20-25 per cent in the next 12 months.
Patrick Chow Moon-kit, research manager, Ricacorp Properties
It is better to rent a flat now as home prices will continue to fall. But you can start looking for bargains.
For example, I found one flat in City One Sha Tin that was going for HK$1.5 million and is now down to HK$1.01 million. The right time to buy is when we see the bottom of this downward cycle - probably 2010, or even 2011. I expect both prices and rents to fall another 30 per cent.
Fredy Wu Yat-fat, chief executive, Hong Kong Property
If you are financially sound, I think it is the right time to buy. I expect the housing market to soon find its support level after a fall of 20 to 40 per cent in mass and luxury properties.
It has already dropped back to 2004 or 2005 levels. In the next three to six months, home prices will swing within a 10 per cent band.
Another reason for buying is the low interest rate environment in Hong Kong and the United States. Mortgage interest expenses now account for only a third of the principal, in contrast to 80 per cent when interest rates were at their highest levels in the 1980s. So it is better to buy than rent at present, in my view.
But where to buy? Picking up properties in urban areas is a must in such an uncertain environment. When buying, the strategy should be to offer 5 to 10 per cent below the banks’ valuation. This way, you will put yourself in a pretty safe position.
1 comment:
Is this the right time to buy a property?
The benefits of renting vs purchasing
Peggy Sito
7 December 2008
As home prices come crashing down, those who were planning to buy property find themselves torn between the temptation to go bargain hunting and watching from the sidelines to see how prices trend before jumping into a deal.
Home prices in Hong Kong have fallen 20 per cent to 30 per cent in the past two months, with anxious sellers presenting opportunities not seen in years. Many are convinced that prices have fallen enough and are snapping up new offers on the market.
Within days of their launch in the last week of November, some 400 flats were sold at mass housing project La Grove in Yuen Long, and 200 homes at the luxury residential project Peak One in Sha Tin.
But the reluctance to venture into the troubled real estate market seems equally strong. November home sales in Hong Kong dropped last month to the lowest level in 17 years. Only 3,786 properties were sold for a total of HK$10.65 billion, according to the Land Registry. This was even worse than the property market’s last big downturn during the severe acute respiratory syndrome outbreak of 2003.
Home purchases fell 37.5 per cent from 6,185 deals in October, and were 79.1 per cent less than the 18,319 deals in November last year.
The value of deals dropped 43.8 per cent from HK$19.85 billion in October, down a whopping 86.9 per cent from the HK$83.27 billion recorded in November last year.
With a shrinking economy and rising unemployment weighing down the market, many are asking themselves if they should wait a little longer to buy a house in order to get a better deal. Sunday Money asked some experts in the industry the same question: if this is not the right time to buy, when will it be, we asked. And is renting a better idea than buying in the current climate?
Leland Sun, founder and managing director of Pan Asian Mortgage
Buyers should hold off until next year, as property prices lag stock prices by six to 12 months. This is because Hong Kong is just beginning to readjust its property prices relative to the mainland (especially Shenzhen) and the rest of the world.
Also, given the Hong Kong dollar’s peg and weakening currencies, property prices will fall even faster and with greater volatility. Property prices here will fall back to a level where it will be an attractive buy in not just one but several lifetimes.
So rent is the way to go for now. In a nutshell, property will be an even better buy than stocks going forward, but it is still too early to step in.
Buyers should wait until the second half of 2009, or even 2010. The housing price trend is down and rents, especially for middle and high-end properties, may fall even faster given the expected loss of many expat positions in the financial services industry. Make good use of this opportunity.
Alva To, North Asia head of the consultancy department at DTZ
Don’t buy. If you own a home, you may even consider selling it now and renting a unit. Taking into account the poor state of the economy, prices will fall another 20 to 30 per cent.
Some buyers have started entering the market, so home prices will see some support temporarily.
These people have entered the market as they have not been affected by the declining economy.
But the worst is yet to come. The full impact will be reflected after the first quarter of 2009. By then, sentiment will turn sour and home prices will fall again.
Having said that, if you have targeted a particular flat for a long time, if you are totally secure in your job and are financially sound, go for that dream home.
In a bull market, you will never get a chance to buy a nice flat at a low price. Prices will drop 40 to 50 per cent from the peak in the first quarter of this year before it stabilises in the fourth quarter of next year.
But the situation could be worse, subject to how the economic crisis unfolds. Rents will also fall, but at a slower pace than prices. This is because as demand for home buying declines, people will shift to rented homes.
Nicholas Brooke, chairman, Professional Property Services Group
Given the likelihood of further downward adjustment, home seekers would be prudent to rent and ride out the financial storm.
However, if they find something that they particularly like and are prepared to see the value fall in the short term but recover in the long run, they might consider buying it.
It all depends on their investment horizon.
Ideally, the right time to buy should be at or close to the end of the current correction, which in my view is at least 12 months away.
We are likely to see a total correction in the mass market of between 30 and 40 per cent.
A correction of at least 15 per cent has already taken place.
Simon Lo Wing-fai, director of Colliers’ research and advisory wing
Renting is the better option in the near term unless one has a flexible amount of equity and can secure an attractive discount on the current market price.
The right time to buy should be when banks are more willing to offer financing again and rents start stabilising. I expect rents to fall 20 per cent and the capital value of homes to fall 20-25 per cent in the next 12 months.
Patrick Chow Moon-kit, research manager, Ricacorp Properties
It is better to rent a flat now as home prices will continue to fall. But you can start looking for bargains.
For example, I found one flat in City One Sha Tin that was going for HK$1.5 million and is now down to HK$1.01 million. The right time to buy is when we see the bottom of this downward cycle - probably 2010, or even 2011. I expect both prices and rents to fall another 30 per cent.
Fredy Wu Yat-fat, chief executive, Hong Kong Property
If you are financially sound, I think it is the right time to buy. I expect the housing market to soon find its support level after a fall of 20 to 40 per cent in mass and luxury properties.
It has already dropped back to 2004 or 2005 levels. In the next three to six months, home prices will swing within a 10 per cent band.
Another reason for buying is the low interest rate environment in Hong Kong and the United States. Mortgage interest expenses now account for only a third of the principal, in contrast to 80 per cent when interest rates were at their highest levels in the 1980s. So it is better to buy than rent at present, in my view.
But where to buy? Picking up properties in urban areas is a must in such an uncertain environment. When buying, the strategy should be to offer 5 to 10 per cent below the banks’ valuation. This way, you will put yourself in a pretty safe position.
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